X Companys chief accountant has accumulated the following annual estimated production and service department cost.

Service Departments

Employee Relation. $35000

Storeroom 42000

Maintenance 48000

Production Departments

Mixing 47350

Baking 57650

To allocate service department costs to production departments the relevant cost drivers are:

Employee Relations Number of Employees

Storeroom Material requisitions

Maintenance Maintenance hours

Budgeted values:

Department. No. of emp. Material requisition. maintenance hours machine hours

Employee Relation 1000 400 400

Storeroom 500 700 1800

Maintenance 2500 1000 700

Mixing 4000 3000 8000 4000

Baking 3000 1000 2000 5000

Required:

a. Use the direct method and allocate service department costs.

b. Assume production department costs are allocated to products based on machine hours, calculate the overhead rate for the production departments.